BNP’s €1bn private debt play

The French banking group has joined Europe’s credit fundraising frenzy, writes Alicia Villegas

The asset management business of French banking group BNP Paribas has joined the growing number of organisations raising private real estate debt funds in Europe.

BNP Paribas Asset Management held a first close of its debut property debt vehicle in February, with a view to eventually raising €1 billion by Q4 2018. Although the firm did not disclose the volume of capital raised to date, it is understood to have attracted several hundred million euros overall for its real estate and infrastructure platform, which was launched last June.

“We are on track with our targets,” Philippe Deloffre, the firm’s head of real estate debt tells PDI sister title Real Estate Capital.

The firm is closing in on its first two lending deals, with €150 million expected to be originated across two loans imminently. BNP Paribas AM’s strategy is to lend across the eurozone, providing senior loans up to a loan-to-value ratio of 65 percent. It will target margins between 150 basis points and 300bps, depending on the country and risk profile of the asset. It can lend to core properties, although core-plus and value-add deals will be targeted.

Increased institutional investor interest in the asset class has prompted the expansion of the firm into private property debt. Regulation is putting pressure on banks’ property lending and alternative lenders are growing their market share across Europe, Deloffre adds.

The asset management unit will work as an “integrated actor” within the BNP Paribas group’s banking and real estate units, benefiting from market research and on-the-ground information to identify lending opportunities, Deloffre says.

“We have an ongoing discussion with the group’s bank to identify opportunities. The bank has a holistic approach to the market, lending to any type of borrower, but we wouldn’t lend to a REIT, for example, because we wouldn’t get our return,” he notes.

Deloffre says the asset manager and the bank could team up when they are targeting the same spectrum of senior lending. “We could work together on a club basis, but we don’t particularly address the same market on senior debt,” he adds, noting the core-plus and value-add target for his business.

French spike

BNP Paribas AM’s fundraising comes amid fundraising by rival French managers. The joint venture between AEW and Natixis Asset Management expects an imminent final close for its second property debt vehicle, targeting €700 million. Meanwhile, asset manager Acofi is aiming to raise €600 million of capital for its fifth property debt fund by July. Last September, Paris-based AXA Investment Managers – Real Assets, closed its 10th property debt fund on €1.5 billion.

The spike in fundraising by French managers is part of a wider trend across Europe, with investors keen to put money into private debt vehicles to access real estate returns with the defensive qualities debt provides. In Q4 2017, Europe-focused vehicles attracted $2.19 billion of capital, which represents an increase of 42 percent year-on-year, Real Estate Capital data show.